State Tax Question

Let's say I live in a state which skims some of the jackpot winnings into its own coffers by way of state taxes and I hit 'the big one'... is it reasonable to change my place of residence to a nearby state which has no state taxes prior to my claiming the winnings? Thoughts? Pros or cons?

First, it would be considered Tax Evasion, which comes with some pretty stiff penalties.

Second, as I understand it, each State that participates within the multi-state lotteries already have prearranged aggreements as to who gets what and how much, no matter what.

Third, as I understand it, the State the Ticket was purchased in is the state who is responsible for collection and payouts. And I think they could care less where your current (or future) residence is, they will get their cut before you see the check.

And Finally, if you should win a substantial pot to which this is an issue for you, I highly suggest you form a team of advisors consisting of a Tax advisor, an Accountant and a financial specialist Lawyer. This is assuming you feel you need assistance in protecting your newly found assets.

These are just my opinions, hope you do hit it big enough that you require such assistance.

If your winnings are from a lottery ticket bought in Ohio then you pay Ohio states taxes regardless of where you live. I think all states work the some way. If you don't want to pay state taxes on your lottery winnings then buy your tickets in a state that doesn't have state taxes and move before you win.

Just my 2 centavos worth. CA residents do not pay CA income tax on CA lottery winnings. We are only responsible to IRS. However, if I won a lottery in Arizona, I would have to pay CA income tax and maybe even AZ tax.

A long and winding roadUnited StatesMember #17084June 10, 20054532 PostsOffline

Posted: July 20, 2005, 7:55 pm - IP Logged

PA is another state that applies the exemption rule :)

As for my lovely neighbor state Maryland- they tax at all levels and take out the taxes due prior to issuing the winning. So state,federal, and county are each pre-taxed. Thus why when I play the MM from there I have to realize my winnings are taxed around 40% ( 35% federal, 4% state and 1-2% county) . I personally think they should let the person invest the tax the first year and then pay at years end.

As someone mentioned- its not the state you reside but the state the ticket was purchased and claimed that decides its tax clause. Most states even tell you that on Multi state draws you can only claim it in the state it was purchased.